* Indexes up: Dow 0.6%, S&P 500 1.1%, Nasdaq 2.2%

* Microsoft ( MSFT ) jumps after forecasting upbeat sales, cloud

growth

* Meta drops after second-quarter free cash flow plunges 91%

* Traders see 57% chance of 25-bps Fed rate hike in

September

(Updates after market open)

By Shashwat Chauhan and Ragini Mathur

July 30 (Reuters) - U.S. stocks gained on Thursday as

Microsoft's ( MSFT ) stellar forecasts soothed concerns about massive AI

spending by companies, while investors also parsed fresh GDP and

inflation data a day after the Federal Reserve's rate decision.

Microsoft ( MSFT ) jumped around 15% after the company forecast

current-quarter sales and cloud growth above expectations,

capital expenditure below estimates and said it expects to keep

generating cash through its fiscal 2027 that just began.

Investors have been spooked by rising AI costs at big technology

firms even as they report strong earnings. Negative cash-flow

reports from Alphabet and Tesla last week

sparked a bout of selling in AI-linked stocks, with chip stocks

also coming under pressure as investors questioned high

valuations. The tech-heavy Nasdaq-100 dropped 10% from

its early June peak on Wednesday.

In a sign that AI concerns were far from over, Meta Platforms ( META )

shed nearly 9% after the social media giant reported a

91% drop in second-quarter free cash flow, underscoring the

financial strain of its costly AI buildout.

"The concern is no longer just how much these companies are

spending - it's that higher rates may not deter them from

spending more, because they see the AI buildout as a competitive

necessity," said Anna Rathbun, CEO and founder of Grenadilla

Advisory.

Apple ( AAPL ) and Amazon ( AMZN ) are scheduled to report

earnings after the bell. Amazon ( AMZN ) was up about 3%, while Apple ( AAPL ) was

down 1.6% in early trading.

On the data front, U.S. economic growth slowed in the second

quarter amid a widening in the trade deficit, increasing at a

1.5% rate versus estimates of 2.1% growth. A separate reading

also showed U.S. inflation slowed in June.

At 09:50 a.m. ET, the Dow Jones Industrial Average rose

290.48 points, or 0.56%, to 51,884.62, the S&P 500 gained

81.98 points, or 1.12%, to 7,398.13 and the Nasdaq Composite

gained 542.32 points, or 2.22%, to 24,985.26.

Technology stocks led gains among the major S&P

sectors, rising 4.2%

Chips also climbed early on, with the Philadelphia chips index

up 6.7%, set to snap a five-day losing streak.

Markets closed sharply lower on Wednesday after the Fed left

interest rates unchanged in the 3.50% to 3.75% range, but mixed

messages from new Fed Chair Kevin Warsh left traders confused

about the path of borrowing costs.

"The hold on rates is justified when you're looking at the

downward movement of the PCE numbers," Rathbun said.

Bond markets were on edge, with the yield on the 30-year

Treasury bond surging to its highest level in 19

years, as investors grew increasingly concerned about the

central bank's monetary-policy outlook and sought greater

protection against future inflation.

Traders currently see a 57% chance that the U.S. central bank

will raise interest rates by 25 basis points at its September

meeting, according to LSEG-compiled data.

Qualcomm ( QCOM ) fell 3.2%, as the chipmaker forecast

fourth-quarter profit below estimates and said revenue from

Apple ( AAPL ) products would decline faster than expected.

Carvana ( CVNA ) tumbled 9.9% after forecasting full-year

adjusted core profit below Wall Street expectations.

Starbucks ( SBUX ) was up 3.5% after the world's largest coffee

chain raised its annual sales and profit forecasts.

Advancing issues outnumbered decliners by a 1.21-to-1 ratio on

the NYSE and by a 1.68-to-1 ratio on the Nasdaq.

The S&P 500 posted two new 52-week highs and 2 new lows while

the Nasdaq Composite recorded 30 new highs and 72 new lows.